News & Updates


Property insurance illusions could turn into harsh reality


Magicians will tell you that one of the keys to a successful illusion is the willingness of the audience to believe that what it is seeing is real. The building really is levitating. The elephant really is walking on water. 

But, of course, it’s not real, which is why the show always must end. You can sustain trickery for only so long.

And so it is with Florida’s property insurance market. We want to believe that rates can be controlled, that government can permanently suppress free-market forces, that most of us can afford to live in coastal areas. But sooner or later reality takes hold.

That’s exactly what’s happening as Citizens Property Insurance announces rate hikes that could lead to a doubling of premiums in the next five years. In 2008, the Legislature prevented Citizens from raising rates until 2010, and now the state-run insurer must make up for lost time and lost premiums.

In fact, almost every effort to avoid the inevitable — deregulation of rates — has backfired. Consider Gov. Charlie Crist’s 2007 insurance reforms, which have led to rapid growth at Citizens, originally intended to be an insurer of last resort. That growth translates into massive liability for Floridians, who ultimately will pay any financial shortfall if a major storm hits.

Such measures should only be viewed as short-term solutions, meant to buy us time while we look for long-term fixes, such as the creation of a national catastrophe program or a complete overhaul of the state’s property-insurance system.

Even land policies that seem innocuous have proven problematic. For example, developers are allowed to destroy wetlands in an area if they replace it with wetlands elsewhere. The result, according to a recent report on property insurance by The James Madison Institute in Tallahassee, is that coastal wetlands have been destroyed and replaced mostly with inland marshes that serve as animal habitats.


Nice, except that it’s the coastal wetlands, not the inland variety, that protect us from storms.

Eli Lehrer, the author of the report, isn’t kidding himself about Florida’s property insurance system, which he says is on the brink of collapse. He recommends that we phase out Citizens and the Catastrophe Fund, the state-run reinsurance program, and reduce risk with a comprehensive mitigation strategy that ensures quality construction and sound environmental policy.

The moves would completely transform the state’s patterns of development and population growth. And they almost certainly would lead to higher property-insurance premiums in the short term.

But, eventually, they would bring back private insurers, capital and competition, the necessary ingredients for any easing of rates.

By then, of course, many of us will have been priced out of living here, and that, after all, is the reality we don’t want to face: that the state, and South Florida in particular, is becoming a place for the wealthy, with little room for the poor and even less room for the middle class.

So we refuse to look behind the curtain and put off facing reality. Meanwhile, like a magician’s assistant, politicians aid the process by not considering the long-term benefits of doing away with Citizens and the current system.


Such change would require unbelievable courage on the part of politicians and government leaders.

About that, few of us have any illusions.